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Eddy Prabowo
IPB University
Economics, Econometrics & Finance

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Dynamic Relationship of Macro Variables and Liquefied Petroleum Gas Subsidy Transformation Program Eddy Prabowo; Harianto Harianto; Bambang Juanda; Dikky Indrawan
Binus Business Review Vol. 14 No. 2 (2023): Binus Business Review
Publisher : Bina Nusantara University

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.21512/bbr.v14i2.8557

Abstract

Most Indonesians rely on liquefied petroleum gas as one of their primary sources of energy. Liquefied petroleumgas is classified into subsidized and non-subsidized. Subsidized liquefied petroleum gas is primarily used bylow-income households, small businesses, as well as poor fishermen and farmers for cooking. However, no exitstrategy has been established to overcome the increase in government spending on subsidized kerosene introducedin 2008. The problem is that macro variables may influence liquefied petroleum gas economic prices. The researchaimed to identify the relationship between macro variables that might affect liquefied petroleum gas economicprices. It applied a quantitative method with Vector Auto Regression (VAR) and Vector Error Correction Model(VECM). The results demonstrate that inflation rate have a significant impact on the economic price of liquefiedpetroleum gas. Then, gross domestic product, inflation rate, and world gas price have positive correlations to theeconomic prices in liquefied petroleum gas. Meanwhile, currency exchange and world oil price have negativecoefficients. The regression model indicates that a rise in inflation increases market prices in liquefied petroleumgas. Furthermore, the increased subsidized fuel means more poor people cannot afford liquefied petroleum gas. Itis because high inflation reduces purchasing and potentially increases the number of poor people.
Co-Authors Bambang Juanda Dikky Indrawan Harianto Harianto